Mark R. Ferri and Nanette Bulger, contributors
Cynthia Cheng Correia is Director of Information Services at Fuld & Company, Inc., a research and consulting firm that has pioneered competitive and strategic intelligence services for a quarter century. Mark R. Ferri is Fuld & Company’s Vice President and Director of Global Energy Practice. Nanette Bulger is Fuld & Company’s Vice President and Director of Global Industrial and Manufacturing Practice.
The wider business community has increasingly embraced competitive intelligence (CI) over the past two decades, and recent years have seen a leap in the interest, employment, and establishment of CI across industries. Over the years, pioneering CI firm Fuld & Company has completed over 3,000 consulting assignments and trained over 7,000 individuals. A significant number of Fortune 500 and smaller companies outsource competitive intelligence services or have established in-house CI units to improve their tactical and strategic decision-making. The legal industry has recently recognized CI and its value in the face of increasing competition. While law professionals have been keenly aware of competitive issues and have applied competitive techniques and practices, CI as a discipline and a process is only beginning to be fully understood and formalized in the business of law. This is evident in the legal industry press and conference programs, including the upcoming Tenth Annual Marketing Partner Forum.1
With growing attention on competitive intelligence in the legal industry, it is timely to ask, “What exactly is CI? And how can it increase competitiveness of law practices?”
Competitive Intelligence Defined
Competitive intelligence activities can be traced to the dawn of commerce and have been practiced through millennia. The coining of the term and the formalization of competitive intelligence as a discipline and a business process has taken place over the past 20-25 years. Competitive intelligence is the practice of examining the external competitive environment – direct rivals, clients, economic/regulatory matters, and more – to support the development of more resilient, robust strategy and tactics. The intelligence outcome is meaningful, actionable, and provides “an insight about change and future developments and their implications to the company.”2 Effectively, CI improves tactical and strategic decision-making through understanding the competitive environment.
Unlike business intelligence, which has become a catch-all term that companies like IBM use to describe data mining and activities involving business information, CI involves competitive analysis and examines competitive forces within one’s industry. In the other direction of the taxonomic hierarchy, competitor intelligence is related to competitive intelligence as its facet. While competitive intelligence is concerned with industry forces, competitor intelligence distinctly centers on the activities of a rival. Finally, competitive intelligence must also be distinguished from competitive information gathering, which is a component of CI, but lacks analysis and meaning – the essence of intelligence. This includes company profiles or news items, which inform about a competitor, but – without analysis or context – provide little meaning and insights to support strategy and decision-making.
The practice of competitive intelligence is a business process that involves defined characteristics and components:
Each step is essential and employs established techniques that are applied to specific questions or issues. The analysis phase, for example, applies a host of tools, including:
- Radar Screening
- Channels/Market Segmentation Analysis
- Blindspots Analysis
- Financial Forensics
- Scenario Planning
- War Gaming
As we define CI, it is essential to emphatically distinguish and disassociate intelligence from corporate or industrial espionage. CI involves the analysis of information gathered from publicly available sources and industry experts. From these expert networks, CI uncovers public information that has yet to be or will not necessarily be published. These intelligence activities should comply with the Economic Espionage Act of 1996 and antitrust laws; and if conducted properly, CI should not engage in other illegal or questionable tactics. Beyond legal questions, the CI profession has also addressed the issue of ethics. The Society of Competitive Intelligence Professionals has compiled a Code of Ethics, and many corporate CI units and CI consulting firms have adopted their own ethical codes.
Having established what competitive intelligence is and isn’t, let’s examine how CI may be applied to the legal industry. Unlike most industries, there are two distinct ways: competitive intelligence in the business of law and competitive intelligence in the practice of law.
Competitive Intelligence in the Business of Law
One application of competitive intelligence to the legal industry is in “the business of the practicing of law.”3 This involves using CI to advance a legal practice over its competitors. Still nascent in adoption and practice within the legal industry, using CI offers competitive advantages to those employing it over those that do not. Competitive intelligence guards against uninformed assumptions, helps identify critical gaps, and enables firms to improve strategy and decision-making. CI accomplishes all this by identifying key competitive issues, asking the right questions (perhaps for the first time), assessing competitive forces, understanding competitor situations and activities, interpreting early warning signals, and constructing scenarios. In the face of increasing competition and higher stakes, CI can protect companies from getting caught off guard, identify opportunities, as well as establish or maximize a firm’s competitive position.
While other industries have adopted CI much earlier, and are thus more advanced in their CI processes and applications, the legal industry is quickly catching on. Ann Lee Gibson, a business development consultant to law firms, has observed an “explosion in the conversation (regarding CI) in the last year to a year-and-a-half” and describes this as “an amazing time, as the market is maturing quickly.” Thus far, most of the legal industry’s approach to competitive techniques has been tactical and aimed at specific competitors; however, a shift to a strategy focus is occurring. Dr. Gibson notes, “old strategies have their limits — like the thinking, ‘do good work and they will come.’ Firms have begun to ask, ‘What decisions are we trying to make? What patterns can we develop and observe that can help us make a better decision?’”
Once the value of CI is recognized, competitive intelligence may be incorporated into the business of law in three ways: 1) establishing a competitive intelligence process within the firm 2) outsourcing intelligence services 3) a combination of the two. Establishing a process requires understanding your firm’s strategy, operations, and market; your industry’s dynamics; as well as the competitive intelligence process, functions, techniques, and tools. Outsourcing services is often a cost effective means of incorporating CI into a firm. Services include competitive research (both literature searching and human source collection) and analysis, competitor monitoring, strategic exercises, training and education, and competitive information management. An established body of literature, education and certificate programs, professional services, the Society of Competitive Intelligence Professionals (SCIP), and other resources are also available to support the development of CI within your company. It is essential to emphasize that a firm’s success in implementing CI process and functions is contingent upon having the full support of and access to a firm’s decision-makers.
By its nature, the legal industry generates a wealth of information from which competitive analysis may be conducted. While electronic access to certain documents is still in development, existing literature enable firms to track deals, clients, jurisdiction, money transfer (the cardinal rule of CI remains, “Wherever money is exchanged, so is information.”4), and other industry developments. Like many competitive intelligence practitioners, Dr. Gibson maintains a database of current developments in the industry and of major law firms, and she employs statistical software to determine patterns and trends, and to reveal “where there’s vulnerability, impenetrability, and to find where the action is.”5
Competitive Intelligence in the Practice of Law
The second application of competitive intelligence can be found in legal services, at points that mark the intersections of CI and law practices. This encompasses various types of activities in many legal settings. Within corporations, for example, legal departments may work with CI units to determine in-house policies for CI practices. This ensures that the company’s competitive intelligence activities stay within legal and ethical boundaries.
A deeper relationship between law and CI occurs when law firms and corporate legal departments collaborate with competitive intelligence consultants or corporate CI units on business initiatives, including mergers and acquisitions, corporate governance, and intellectual property valuation and management. This type of association enhances outcomes by capitalizing on the complimentary expertise of both legal and CI practitioners. Competitive intelligence consultant Ben Gilad describes corporate attorneys as “among the best sources of competitive advice, and among the brightest analysts of competitive information.”6 Moreover, lawyers who work exclusively for industry have always been “in the midst of the game,” and these practitioners – particularly those in New York, Silicon Valley, and other areas with developed industry clusters – consistently process information they gather through networking and apply it to strategy and competitive decision-making7. The aptitudes and activities of legal professionals, when combined with CI expertise and the structure of an intelligence program, can more efficiently and effectively capture key intelligence that can enhance strategic decision-making for corporate clients.
Unlike the application of CI in the business of law, competitive intelligence in the practice of law has a demonstrated history. Intelligence firms like Fuld & Company have combined their expertise with those of corporate legal departments for over two decades. Key areas of activity include:
1. Mergers, Acquisitions, and Strategic Alliances
As companies seek to reduce costs, spread investment risks, accelerate growth, or otherwise achieve competitive advantages, they may pursue strategic or financial combinations. Recent years have seen notable failures, often as a result of flawed or incomplete investigations conducted ahead of ventures. For example, while acquiring firms typically focus on aspects like sales and product lines, less consideration is given to critical scientific, technical, and R&D aspects of the comp
Companies can reduce the risk of failure, however, by applying intelligence in the targeting, due diligence, and valuation. Mark Ferri, Vice President and Director of Fuld & Company’s Global Energy Practice, notes, “Strategic and competitive intelligence expertise and due diligence in the M&A environment can be an asset to law firms in identifying and screening potential acquisition candidates/investment opportunities, particularly in this volatile period of market uncertainty.” CI comprehensively applies research and techniques like Competitor Response Modeling, Porter’s Five Forces Analysis, Cost Analysis, and Patent Citation Analysis to particular aspects of alliance activity. Fuld & Company, for example, has developed a standard M&A due diligence checklist that integrates established competitive intelligence tools and practices.
In acquisitions, CI can identify rival bidders, examine the regulatory climate, determine trends, warn of potential problems, and assess the strategic and cultural fit of the firms involved. For strategic alliances, intelligence can define the value proposition, identify key tangible or intangible assets, as well as assess strategic and cultural fit. At the other end of acquisition activity, CI can identify potential predators through surveying the landscape, designing filtering criteria, analyzing and ranking the players, and monitoring market signals.
2. Intellectual Property
As mentioned above, CI analysis techniques for intellectual property can be applied to merger and acquisition activities. More directly in corporate IP functions, intelligence can advance patent generation and portfolio management. Integrating CI into the product development cycle can provide guidance and direction to patent strategies and decisions. CI and related due diligence can help streamline the R&D process by identifying areas that deserve resources and attention, aligning efforts with corporate strategy, uncovering competitor activities that can impact the success of patent and product development, and developing and maximizing the value of the company’s patent portfolio for future product development or other means of revenue generation.9
Companies are increasingly leveraging their patent portfolios to generate revenues. According to Nan Bulger, Vice President and Director of Fuld & Company’s Global Industrial and Manufacturing Practice, “Companies quite frequently have technologies sitting on their shelves that could be licensed or sold.” By streamlining the portfolio through patent optimization, patents that are not essential to a firm’s strategy can be divested, thereby generating revenue opportunities. To this end, CI can support the licensing team’s portfolio management through patent evaluation, identifying likely partners and licensing prospects, screening and negotiation of prospects, the sale of technologies, and continuous monitoring and implementation of the patent optimization process. Furthermore, employing a patent generation process that results in strategically necessary patents will minimize portfolio management costs.
3. Corporate Governance
As corporate governance undergoes considerable scrutiny in the wake of recent corporate scandals, corporations are forced to remedy faulty processes and to prevent questionable practices. The call for greater transparency and dialogue has emerged as the primary defense against repeating this state of affairs. As some debate the competitive risks of these solutions, many recognize advantages. According to attorney Richard Wise of Eckert Seamans Cherin & Mellott, LLC, “Transparency is not disclosing trade secrets, but [disclosing] how you performed. It is not an operational disadvantage.”10 He asserts that reason should serve as the basis of transparency, in order to guard against excessive or other inappropriate measures. Indeed, emotions often run high in the immediate aftermath of crisis, particularly those involving high stakes; and the rush for solutions can lead to measures and actions that may be extreme or ineffective.
The application of the intelligence process and infrastructure to corporate governance can establish a strategic form of transparency within organizations, as well as offer safeguards against unethical, questionable, or otherwise poor actions and decisions. In strategic transparency, intelligence practices are applied in order to increase corporate competitiveness. For instance, it has become evident that “the scandals in corporate America have not been so much a crisis of morals or ethics, but rather a data management problem.”11 While this statement ascribes fault to data management, it suggests that information, knowledge, and intelligence breakdown is at issue. CI’s established methods and mechanisms can empower managers and directors independently access critical resources to clearly view the external marketplace, interpret signals, make timely and rational decisions, as well as harness organizational knowledge and market insights to inform decisions. Furthermore, intelligence functions, expertise, and outcomes can educate new directors, as well as support a board’s efforts by managing internal processes and continuously updating directors to critical business and industry developments. As Mr. Wise observes, ultimately “there is competitive advantage in good governance.”12
Unlike most sectors, the legal industry can apply competitive intelligence both as a business process in law firms and in client services through collaboration with CI service firms and corporate clients. While many law practices can implement both types of initiatives, all practices can leverage intelligence to inform strategy and maintain an edge in the face of increasing competition. As corporate attorneys better understand how competitive intelligence can add value to their core legal services, collaboration with CI professionals will become routine in key areas of law-related business activity. This could further shape the evolution of competitive intelligence by enhancing its techniques and further broadening its impact to companies across industry sectors.
For more information about competitive intelligence
Fuld-Gilad-Herring Academy of Competitive Intelligence
CI Center from Factiva and Fuld & Co.
Fuld & Company, Inc.
126 Charles Street
Cambridge, MA 02141
tel 1.800.492.5904 (US) / 617.492.5900
Society of Competitive Intelligence Professionals (SCIP)
1700 Diagonal Road, Ste 600
Alexandria, VA 22314
1 The Tenth Annual Marketing Partner Forum: “Successful Marketing in an Uncertain Economy.” Presented by Glasser LegalWorks, January 20-23, 2003, www.glasserlegalworks.com. <back to text>
2 Benjamin Gilad, Business Blindspots: Replacing Myths, Beliefs, and Assumptions with Market Realities (Wiltshire, England: Infonortics, Ltd., 1996), p. xviii. <back to text>
3 Ann Lee Gibson, PhD. personal communication (December 3, 2002), Ann Lee Gibson Consulting, tel 505.758.5919 <back to text>
4 Leonard Fuld, The New Competitor Intelligence: The Complete Resource for Finding, Analyzing, and Using Information About Your Competitors (New York: John Wiley & Sons, Inc., 1995), p. 27. <back to text>
5 Gibson.  <back to text>
6 Gilad, p. 216.  <back to text>
7 Gibson.  <back to text>
8 Anthony Breitzman and Patrick Thomas, “Using Patent Citation Analysis to Target/Value M&A Candidates,” Research Technology Management (September – October 2002), pp.28-36. <back to text>
9 Nanette Bulger, “Optimizing the Value of Intellectual Property By Employing Market Analysis Through Competitive Intelligence Techniques in Patent Development and patent Management,” paper presented at the American Intellectual Property Law Association Annual Meeting, Washington D.C. (October 17-19, 2002). <back to text>
10 Richard Wise, personal communication (December 9, 2002), Member, Eckert Seamans Cherin & Mellott, LLC, tel 617.342.6800. <back to text>
11Tim Race, “Compressed Data; Corporate Chiefs Aren’t Amoral. Perhaps They Need More Data.,” The New York Times (November 4, 2002), p. C5. <back to text>
12 Wise.  <back to text>
Copyright Cynthia Cheng Correia, 2002, 2003.